Congress must act to prevent a full-blown housing crisis

The COVID-19 public health pandemic has quickly precipitated into an economic crisis, weakening the financial footing of American households across the country. This is particularly true for Black and Latino households, for whom racial divides in housing access and homeownership rates long preceded the current economic fallout.

The worsening economic outlook will, unfortunately, lead to even higher unemployment, lower wages, and significantly less income for working families nationwide, many of whom were struggling to make ends meet long before the pandemic hit.  

Today, there are more than 20 million people are out of work — more than at any other point since the Great Depression. Within this grim employment landscape, Black and Latino workers are experiencing disproportionate economic challenges, including an unemployment rate of 16.8 percent and 17.6 percent, respectively. 

These workers are also more likely to be employed in low-wage jobs, which are less likely to offer remote work options or paid leave and health insurance benefits. Low wages leave workers with limited or no savings to backfill an unexpected and sustained loss of income.  The federal government needs to step in to ensure that workers have immediate access to a variety of resources and relief programs.

It is safe to assume that an avalanche of evictions will soon be upon us; and if the Great Recession is any guide, mortgage foreclosures will follow. The Great Recession ended in 2009, but the number of foreclosures did not peak until the summer of 2010. As Congress considers additional relief for homeowners and renters struggling to remain safely in their homes during this pandemic, it should ensure that all Americans can access federal aid and relief programs by providing funding for housing counseling services, including foreclosure and eviction prevention, and the Neighborhood Stabilization Program (NSP).

In the run-up to the Great Recession, Congress created the National Foreclosure Mitigation Counseling (NFMC) program and charged it with the task of developing innovative tools and approaches aimed at helping millions of American families that were at risk of losing their homes due to foreclosure or to tailor the best possible response to their situation.

The NFMC program proved uniquely successful in helping stabilize U.S. households during what economists considered to be the worst economic crisis since the Great Depression. In its 10-year reign, the program provided individualized counseling and education services to more than 2.14 million Americans who needed help receiving a loan modification on their mortgage, reducing their monthly payments or avoiding serious delinquency or foreclosure on their homes. 

Recipients of NFMC housing counseling services throughout its 10-year tenure were disproportionately households of color in America. The overall share of non-Hispanic Whites that received NFMC housing counseling services ranged from 43 percent to 47 percent, meaning the program recipients of NFMC were disproportionately households of color in America. Program participants also tended to have lower incomes than the average American homeowners and therefore stood to benefit the most from the individualized counseling and educational services offered through NFMC. The median income for all NFMC program participants ranged between $35,180 and $42, 894. 

Overall, recipients of housing counseling assistance services through NFMC were significantly more likely to reduce overall delinquency and thereby less likely to face foreclosure on their homes. These individuals were also more likely to reduce their monthly mortgage payments and less likely as a result to default on their mortgage payments again in the future. 

The program also met congressionally mandated goals to ensure to housing counseling services were directed toward communities that were hardest hit by the foreclosure crisis. To that end, 88.7 percent of the communities that received NFMC housing counseling services met the “greatest need” criteria for areas hardest hit by the foreclosure crisis, with 61.8 percent of the areas considered of “extraordinary need.”  

As one of a number of HUD-approved housing counseling intermediaries that received funding through NFMC, our organizations played a vital role in providing struggling families with services such as foreclosure prevention counseling, rental counseling, homelessness prevention counseling, as well as how to access fair housing education. Congress also provided targeted funding to stabilize neighborhoods ravaged by foreclosures. In 2008, through the Neighborhood Stabilization Program, Congress provided financial assistance to state and local governments to acquire and redevelop foreclosed properties that might otherwise become painful reminders of abandonment and blight within their communities.

Studies show that housing counseling improves outcomes for families struggling with their mortgage. Counseling significantly increases a borrower’s likelihood of receiving a loan modification or coming to a resolution other than foreclosure. Rental counseling services prevent homelessness and eviction by helping renters locate, secure, and retain affordable rental housing. This means funding for the Department of Housing and Urban Development’s Housing Counseling Assistance Program is critical to ensure that families have access to a range of housing counseling services, including foreclosure and eviction prevention.

A recent Census Bureau survey found that many Black and Latino households are uncertain whether they will be able to pay their rent this month. Later this month, the federal moratorium on evictions from federally assisted homes will expire. According to the Eviction Lab, eviction moratoriums and related policies in 19 states will expire at various points over the next 60 days. Similarly, in response to the pandemic, 18 states established moratoria or limits on foreclosures, and most are set to expire or have already expired.

Families unable to pay their mortgage in the coming months will need to navigate a complex process of requesting and accessing mortgage relief programs, which at this time, do not apply to all home mortgages. Housing counseling is particularly vital during times of crisis when unscrupulous actors in the financial marketplace typically seek to further exploit the most financially vulnerable in our society. For many families, being able to speak with a housing counselor to ask questions about how to avoid foreclosure may be the difference between being homeless or staying in their homes during and after this unprecedented crisis.  

Given that buying a home is still the single most significant financial decision most Americans will make in their lifetime, housing counseling should be widely available to help families make better and more informed decisions during challenging economic times.  As relief programs are rolled out, Congress must fund critical services that will help families navigate and apply for available relief and resources. 

The current crisis is giving us flashbacks of the Great Recession when Black and Latino communities disproportionately lost their homes and hundreds of billions in collective home equity. To add insult to injury, this wealth was too often transferred to opportunistic vulture investment firms with no ties to the communities in distress. Tragically, many families have not yet recovered from these losses from over a decade ago. Congress must take swift action to ensure the COVID-19 crisis doesn’t perpetuate and exacerbate the harmful legacy of redlining, discriminatory lending practices, disinvestment, and market failures, causing economic stability and housing access in communities of color in America.

Marc Morial is the president and CEO of the National Urban League, and Janet Murguía is the President and CEO of UnidosUS.